Filed Under:Risk, Enterprise Risk Management

Companies Receive an 'F' When it Comes to Business-Continuity Plans for Overseas Risks

U.S. and Canadian companies looking to expand globally recognize the risks associated with supply-chain failures, but they need to do more to prepare for those risks, according to a recent survey.

Chubb Corp. released results from its 2014 Chubb Multinational Risk Survey, which questioned 300 U.S. and Canadian companies about their international global exposures. The survey shows 52% of the businesses intend to increase overseas activity in 2014. 

The top threats associated with overseas activity mentioned by the companies were supply-chain failure (19%), a data breach/cyber event (15%), government/regulatory investigation and political instability (13% each) and natural catastrophes (12%).

With supply-chain failure topping the list of concerns, it might not be surprising that more companies than not (56%) have a business-continuity plan that addresses overseas risks, but Jay Taylor, vice president, Chubb Loss Control, looks at the flip-side of that statistic: “The bad news is—56% in my world…would be an F,” he says. 

Breaking down the universe of companies that do not have an effective plan in place, Taylor says, “Sixteen percent—if they have a plan, it doesn’t address the issue, 9% don’t have a business continuity, and the 12% that says they don’t know, that means they really don’t have anything.”

Taylor states, “Having a plan in place is critical.” He adds, “A business that does have major business-continuity; business-disaster issue—approximately 80% of those don’t come back after a year,” or they come back in a highly weakened state.

Of the companies that have a plan, 22% have never tested it. Of the 78% that test their plan, Taylor says 38% test it just once a year, while 40% test it occasionally.  

“If you’re not testing your plan, then you don’t really know how it works,” Taylor says. For those that test it infrequently, Taylor notes they might not be capturing changes that take place within the business in between tests.

And business-continuity plans must extend beyond the company itself, Taylor notes. The survey, he says, reveals that 40% of companies do not require overseas suppliers to have a bus-continuity plan. Tayor says if an overseas supplier does not have a plan to recover, and if that supplier provides a critical component to a business, then that business’ continuity plan “isn’t really effective.”

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